Loan Officer Indicted for Submitting Fraudulent Loan Applications

Robert Hance, a Michigan resident and loan officer with Fifth Third Bank, was indicted on charges that he conspired with others to defraud Fifth Third Bank and obtain money through false pretenses. Specifically, straw buyers, who were paid a fee, were allegedly recruited to serve as mortgage loan applicants for the purchase of real property which the conspirators wanted to purchase and develop. Mortgage loan applications containing false information pertaining to the income and assets of the straw buyers were submitted to Fifth Third, by Hance, for approval. The total amount of fraud attributable to Hance is estimated at over $8 million.

Hance was indicted on April 19, 2011.

United States Attorney Barbara L. McQuade was joined by Special Agent-in-Charge Andrew G. Arena, Federal Bureau of Investigation, Special Agent-in-Charge Erick Martinez, Internal Revenue Service, Criminal Investigation, Special Agent-in-Charge Jeffrey Frost, United States Secret Service, Breck Nowlin, Special Agent in Charge, Housing and Urban Development, Office of Inspector General and Paul Walton, Assistant Oakland County Prosecutor to highlight the district’s work in combating mortgage fraud.

The announcement comes a year after the conclusion of a nationwide sweep, “Operation Stolen Dreams,” that targeted mortgage fraudsters throughout the country and was the largest collective enforcement effort ever brought to bear in confronting mortgage fraud throughout the country. The operation was organized by the Mortgage Fraud Working Group of President Obama’s interagency Financial Fraud Enforcement Task Force, which was established to lead an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. Between March 1, 2010 and June 18, 2010, Operation Stolen Dreams involved 1,517 criminal defendants nationwide, including 525 arrests, representing an estimated loss of more than $3 billion. The Operation also resulted in 191 civil enforcement actions and the recovery of more than $196 million.

U.S. Attorney Barbara L. McQuade stated, “The social and financial consequences of real-estate fraud cannot be overstated. Innocent homeowners, our neighborhoods, and government at all levels are victimized by this crime. We are committed to using all of the tools at our disposal to combat these schemes.”

Special Agent in Charge Andrew G. Arena stated, “Mortgage fraud has had a devastating impact on communities across the United States. In southeast Michigan, families have been directly affected by decreasing values of homes, deteriorating neighborhoods, negative impacts on the stock market, and the increasing costs of borrowing. Together with our partners, the FBI is committed to bring the perpetrators to justice and establish a deterrent against mortgage fraud activity in the future.”

HUD-OIG Special Agent in Charge Breck Nowlin stated, “Mortgage fraud has cost the FHA program, borrowers, the American taxpayers and Michigan homeowners millions of dollars. The successes of Operation Stolen Dreams and our continued pursuit of financial fraudsters highlights the tireless efforts of law enforcement to bring to justice those who seek to defraud desperate homeowners.”

“Mortgage fraud, like all financial crimes, threatens the financial health of our communities, victimizing everyone from low-income families to lenders and investors,” said Special Agent in Charge Erick Martinez. “IRS Criminal Investigation will follow the money and work with our law enforcement partners to collect the evidence needed to prove tax and money laundering violations, bring to justice those who create this havoc.”

The office has continued to litigate a large number of mortgage fraud cases initiated both prior to Operation Stolen Dreams and after. Since the end of Operation Stolen Dreams on June 18, 2010, 30 individuals have either pleaded guilty or were found guilty of federal offenses and 27 have been sentenced to prison terms. Prison sentences imposed so far on defendants have been as high as 108 months in prison. Civil forfeitures totaling more than $1.5 million were imposed. In addition, 22 new indictments or informations charging 22 new defendants with mortgage fraud offenses have been filed. Cases charged in the last 12 months involve many millions of dollars of alleged loss.

In addition to stepping up criminal prosecutions, the United States Attorney’s Office has increased its civil division resources directed at mortgage fraud in order to bring civil suits under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), a powerful civil enforcement tool that can be used to impose significant civil money penalties on wrongdoers.

The U.S. Attorney’s Office in the Eastern District of Michigan is one of the first offices in the country to use FIRREA to pursue mortgage fraud and other financial crimes in a civil context. This law is designed to restore to the Treasury funds stolen through illicit mortgage schemes. Currently, the Detroit office has two civil FIRREA cases that are near resolution and several other investigations that are underway. Not only is the Detroit office making effective use of FIRREA in this District, it is also are sharing the expertise that with other U.S. Attorney’s Offices around the country.

The Office’s Affirmative Civil Enforcement team also is using the statute to pursue those who are defrauding some of the most vulnerable among us – senior citizens – by stealing the equity from their homes thorugh fraudulent Home Equity Conversion Mortgages (HECMs), which are FHA-insured reverse mortgages.

The most effective way to address this crisis is through a coordinated effort of federal, state and local law enforcement agencies working with regulators, real estate professionals, victim rights organizations and lenders. To that end, this district’s Financial Fraud Enforcement working group meets regularly to encourage a multi-agency, multi-disciplinary approach to enforcement. In addition to supporting member initiatives the working group is focusing on identifying emerging fraud trends and considering proactive ways to avoid another crisis in the real estate market.

I think most people would agree that mortgage loan applications containing false information pertaining to the income and assets of the straw buyers were submitted to Fifth Third would definitely required some jail time.

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